Correlation Between Aberdeen Small and Aberdeen Gbl

Can any of the company-specific risk be diversified away by investing in both Aberdeen Small and Aberdeen Gbl at the same time? Although using a correlation coefficient on its own may not help to predict future stock returns, this module helps to understand the diversifiable risk of combining Aberdeen Small and Aberdeen Gbl into the same portfolio, which is an essential part of the fundamental portfolio management process.

By analyzing existing cross correlation between Aberdeen Small Cap and Aberdeen Gbl Eq, you can compare the effects of market volatilities on Aberdeen Small and Aberdeen Gbl and check how they will diversify away market risk if combined in the same portfolio for a given time horizon. You can also utilize pair trading strategies of matching a long position in Aberdeen Small with a short position of Aberdeen Gbl. Check out your portfolio center. Please also check ongoing floating volatility patterns of Aberdeen Small and Aberdeen Gbl.

Diversification Opportunities for Aberdeen Small and Aberdeen Gbl

-0.53

Correlation Coefficient

Aberdeen Small  Aberdeen Gbl

Excellent diversification

The 3 months correlation between Aberdeen and Aberdeen is -0.53. Overlapping area represents the amount of risk that can be diversified away by holding Aberdeen Small Cap and Aberdeen Gbl Eq in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Aberdeen Gbl Eq and Aberdeen Small is a relative statistical measure of the degree to which these equity instruments tend to move together. The correlation coefficient measures the extent to which returns on Aberdeen Small Cap are associated (or correlated) with Aberdeen Gbl. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Aberdeen Gbl Eq has no effect on the direction of Aberdeen Small i.e., Aberdeen Small and Aberdeen Gbl go up and down completely randomly.

Pair Corralation between Aberdeen Small and Aberdeen Gbl

Assuming the 90 days horizon Aberdeen Small Cap is expected to generate 1.53 times more return on investment than Aberdeen Gbl. However, Aberdeen Small is 1.53 times more volatile than Aberdeen Gbl Eq. It trades about 0.22 of its potential returns per unit of risk. Aberdeen Gbl Eq is currently generating about -0.05 per unit of risk. If you would invest  3,281  in Aberdeen Small Cap on September 2, 2024 and sell it today you would earn a total of  552.00  from holding Aberdeen Small Cap or generate 16.82% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Very Weak
Accuracy	100.0%
Values	Daily Returns

Aberdeen Small Cap  vs.  Aberdeen Gbl Eq

Aberdeen Small Cap

Risk-Adjusted Performance

17 of 100

Solid

Compared to the overall equity markets, risk-adjusted returns on investments in Aberdeen Small Cap are ranked lower than 17 (%) of all funds and portfolios of funds over the last 90 days. In spite of fairly weak basic indicators, Aberdeen Small showed solid returns over the last few months and may actually be approaching a breakup point.

Aberdeen Gbl Eq

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Aberdeen Gbl Eq has generated negative risk-adjusted returns adding no value to fund investors. In spite of fairly strong basic indicators, Aberdeen Gbl is not utilizing all of its potentials. The current stock price disturbance, may contribute to short-term losses for the investors.

Pair Trading with Aberdeen Small and Aberdeen Gbl

The main advantage of trading using opposite Aberdeen Small and Aberdeen Gbl positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Aberdeen Small position performs unexpectedly, Aberdeen Gbl can make up some of the losses. Pair trading also minimizes risk from directional movements in the market. For example, if an entire industry or sector drops because of unexpected headlines, the short position in Aberdeen Gbl will offset losses from the drop in Aberdeen Gbl's long position.

The idea behind Aberdeen Small Cap and Aberdeen Gbl Eq pairs trading is to make the combined position market-neutral, meaning the overall market's direction will not affect its win or loss (or potential downside or upside). This can be achieved by designing a pairs trade with two highly correlated stocks or equities that operate in a similar space or sector, making it possible to obtain profits through simple and relatively low-risk investment.

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Note that this page's information should be used as a complementary analysis to find the right mix of equity instruments to add to your existing portfolios or create a brand new portfolio. You can also try the Price Ceiling Movement module to calculate and plot Price Ceiling Movement for different equity instruments.